U.K. March Retail Sales Unexpectedly Fall as Fuel Plunges

U.K. retail sales unexpectedly fell in March and the government undershot its borrowing forecasts in the latest fiscal year, providing a mixed set of data as parties spar over the economy in the final days of the election campaign.

The volume of sales including auto fuel fell 0.5 percent from February, the Office for National Statistics said in London Thursday. Economists had forecast a 0.4 percent increase, according to the median estimate in a Bloomberg News survey.

Sales excluding auto fuel rose 0.2 percent, less than predicted.Separate figures showed the budget deficit in the fiscal year ended March narrowed more than officials thought. The shortfall last month was the smallest for any March in 11 years.

Net borrowing excluding public-sector banks was 7.4 billion pounds ($11 billion.) Revenue rose 3 percent and spending fell 3.1 percent. It left the full-year deficit at 87.3 billion pounds, below the 90.2 billion pounds the Office for Budget Responsibility forecast last month.

The retail sales figures suggest the economy may have lost momentum in the first quarter. Prime Minister David Cameron is struggling to turn the recovery he has overseen into votes for his Conservative Party, with polls deadlocked two weeks before the election.

Disappointing’ Figure

“Overall, disappointing,” Alan Clarke, an economist at Scotiabank in London, said in a note. “It may well be that consumers maxed out before Christmas in a discount-fueled frenzy and the post-Christmas period is experiencing a pause for breath.

The monthly data all point towards sluggish Q1 GDP, not the sort of reading that the coalition government will be hoping for.”

The pound was at $1.5009 at 10:02 a.m. in London, down 0.2 percent on the day. The 10-year gilt yield was 2 basis points lower at 1.69 percent. Retail sales, which account for 5.7 percent of gross domestic product, grew 0.9 percent in the first quarter, down from 2.2 percent in the final three months of 2014.

The ONS will publish its initial estimate of economic output for the first quarter on Tuesday.Last month’s slump came as fuel sales dropped 6.2 percent, the most since April 2012, a month affected by fuel shortages.

There was a mixed picture elsewhere, with sales at department stores falling and clothing and household-goods retailers posting gains. Food sales rose 0.4 percent. Compared with a year earlier, retail sales were up 4.2 percent and by 5 percent if fuel is excluded.

Tax Boost

The two main parties are sparring over how best to deal with a budget deficit that still stood at 4.8 percent of GDP in the last fiscal year, with each claiming the mantle of fiscal responsibility. At the last election in 2010, the figure was 10.2 percent. The deficit measure used to calculate how much the Treasury needs to borrow in the financial markets was less than forecast.

The central government net cash requirement was 92.3 billion pounds in 2014-15, instead of the 96.2 billion pounds projected by the OBR. As a result, the Debt Management Office scaled back planned sales of gilts in 2015-16 by 2.5 billion pounds to 130.9 billion pounds.

The Treasury benefited in the latest financial year from the shifting income to take advantage of a cut in the top tax rate. At 169.7 billion pounds, income-tax receipts were the highest since at least 1987-88 and up 5 percent on the year.

Spending barely rose as the fall in inflation to zero reduced payments on index-linked gilts and some welfare costs. Net debt climbed to a record 1.48 trillion pounds, or 80.4 percent of GDP.

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